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  • Writer's pictureFIC Hansraj

Netflix Vs Blockbuster: Paint the Screens Red

From the era of roaming around Blockbuster's shelves for a movie, we have come upon the modern times where we can find one by browsing online libraries. DVDs have turned to mobile apps, one-time rentals have evolved into subscription models and movie nights are being replaced by binge-watching. But what lay behind the scenes of our changing entertainment landscape, where the once-mighty industry giant is now relegated to a realm of nostalgia? (Spoiler Alert: Netflix’s Entry)


In the fast-paced world of entertainment, where we observe OTT platforms fighting to acquire a better market share, one movie rental company and the ex-global leader in this space, Blockbuster witnessed its decline and filed for bankruptcy. Join us as we narrate how Netflix, coming out of the blue, shook up the whole entertainment world leaving Blockbuster in the dust. 



A Blockbuster beginning 

Blockbuster was founded in 1985 by David Cook and emerged as a cinematic first mover advantage to the increasing demand for VHS (Video Home System) movie rentals. With a unique revenue-sharing model in the mid-1980s, Blockbuster acquired videos inexpensively, retaining 60% of rental fees and sharing 40% with studios. At its peak in 2004, Blockbuster employed 84,300 people worldwide and operated 9,094 stores. Blockbuster's strategy prioritised stocking popular films and making sure that no one leaves empty-handed. The company's success came from offering affordable rentals when movies were not readily available. This approach allowed customers a trilogy of choices—rent, wait, or buy at higher retail prices from competitors. All this made Blockbuster an undisputed star in the movie rental industry. But this fame was short-lived as things were about to take a bad turn.


The Real “Blockbuster”

Then came Netflix, and everything went haywire for the OG. Although Blockbuster's demise wasn't solely due to Netflix, the massive debt kept on increasing, and the hopeless pursuit of rapid expansion also played the villain’s role. Netflix became the master of adaptation, and Blockbuster lost its sole purpose, which was to deliver entertainment. The future of streaming was in front of everyone’s eyes and was duly recognised by Blockbuster as well, but they were just not able to compete in this digital run. Failure to understand that change is the only constant sealed Blockbuster's fate. The non-customer-centric approach of Blockbuster also played a role—Blockbuster's reliance on late fees alienated customers, while Netflix prioritised user satisfaction. All this led to the new generation of cinema led by Netflix, which made Blockbuster a mere spectator of its greatness.



Netflix and Chill

Amidst Blockbuster's demise, a lone fort in Bend, Oregon, navigated through the digital age. This store, owned and operated by franchisee Sandi Harding, defied all odds and became a nostalgic refuge. In 2020, the Bend store made headlines on Airbnb, offering an "End of Summer Sleepover," allowing guests to relive the '90s with a sleepover in the world's last Blockbuster. By July 2018, it stood as the last Blockbuster in the U.S., and by March 2019, it was the last globally. In contrast, Netflix, the streaming giant, our real blockbuster, boasts 8.3 million paying customers and 240 million global subscribers, with a revenue of $31.6 billion in 2022. They are available in 190 countries, with 20% of the OTT market in India.


The Climax in Blockbuster’s Dream

Could Blockbuster have painted a different picture, preserving the industry's hues of yellow and blue, rather than witnessing the market turn to shades of red? Perhaps.


The initial step could have been revisiting the first chapter of its story. Blockbuster wasn't just a video rental retail space –it was a source of entertainment. Even the roots of its initial market dominance lay precisely in this defining factor. Subsequently, prioritising customers is the supreme law. A revenue model relying on charging late fees (no matter how lucrative) is not the most customer-driven approach. The company could have focused on providing affordable entertainment rather than sticking to its prevalent and comfortable model. 


Another layer to this perspective includes the possibility of using “disruptive technologies” not persisting well due to the internal structure of the company. It could have happened with Blockbuster, so what now? Well, they could have either acquired Netflix, the pioneer, as they were offered (Yes! Reed Hastings came to Blockbuster to offer Netflix) or they would have created a business unit to experiment with the emerging tech trends. The potential success for this would lie in allowing the chosen online business structure to run independently.

 

Thus, if the company could have agreed to adapt to the ever-evolving changes in the industry (and technology) the narrative would have been very different.


A Critic’s Review 

The battle between Blockbuster and Netflix can be regarded as one of the greatest business case studies of modern times. At its core, this narrative imparts a crucial lesson: Focus on what you do, not just what you've done. For organisations inherently designed to make entertainment easily accessible, the key is to stay committed to that mission. It is widely accepted that this was a story of transition where the old is replaced by the new. The truth is that it wasn’t this simple. 

If Blockbuster hadn’t turned the gun on themselves, it would have been Netflix receiving the killer bullet. 

As is the case with most things in life, it was a nuanced situation. There was a perfect storm of poor decisions, technological advances and other contributing factors that led to Netflix’s staggering growth…and Blockbuster’s equally staggering decline. 


Authors: Hardik Jain and Sehaz Nagpal


Sources

Forbes

Finshots

Business Insider 

Medium



 

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